Some branches are costing banks as much as £118,000 a year for every customer who uses them regularly. The shift to online banking has left hundreds of branches in the UK serving an average of 65 loyal customers who rely exclusively on its services.
In some cases they have as few as five customers who rely on the branch, such as Barclays in Birmingham Edgbaston, or nine, at the Barclays in Eton, Berkshire.
Figures from the Financial Conduct Authority (FCA), the City regulator, show that on average bank branches cost banks £590,000 a year to run. While the costs of running different locations will vary, based on the national average a bank with only eight loyal customers effectively costs £73,750 per customer to run; Barclays Edgbaston would cost £118,000 for each of its five loyal users.
Times Money has analysed the impact assessment reports published by Santander, Barclays, HSBC and TSB, which have all announced branch closures for this year. Banks are obliged to publish these reports when they want to shut a branch. They outline how customers use it, the closest other branches and Post Offices, and how near it is to a cash machine.
They also identify the number of customers who rely on that branch exclusively. Each bank uses slightly different criteria, but in general these are people who use only that branch and do not use online or mobile banking.
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Of the 217 bank branches earmarked for closure by Santander and Barclays this year, on average only 65 people use them exclusively, which would cost the banks about £9,077 per customer. TSB said some of its branches had just 20 customers using them regularly.
Banks’ profit margins have narrowed in the financial crisis as some of their traditional income streams, such as fees from overseas card transactions and withdrawals from cash machines, have dried up. They have been forced to write off huge losses on debts and their profits have been further squeezed by the legacy of low interest rates.
The pandemic has accelerated the trend towards digital banking, as the closure of branches last year during the first lockdown forced millions of people online for the first time. This has led to many customers never returning to bank branches, and the closure of those that have become unprofitable.
Barclays’ chief executive Jes Staley has previously admitted that it was “better for us” if more customers went online, and Jackie Uhi, HSBC’s head of network, said the pandemic had “emphasised the need” for the changes it was making to its branch network.
Santander’s profits fell by more than a third year-on-year to £471 million in 2020 as it was forced to put away cash to cover loan defaults. NatWest’s net interest margin — the difference between what it made from its investments and lending and what it paid in interest on savings deposits — narrowed from 1.99 per cent in 2019 to 1.71 per cent last year, when it failed to report a profit.
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More than 500 branches have been closed or earmarked for closure in the UK in 2021. Barclays is to close 106 branches and Santander 111. Lloyds will close 56 across its Lloyds, Halifax and Royal Bank of Scotland sites, TSB 164, HSBC 82, M&S 29 and NatWest 6.
According to the banks’ impact assessments, the closure of 111 branches by Santander will affect 7,190 customers who rely on them, while with the 106 selected by Barclays, 6,947 customers will be hit. However, within these figures are branches that are relied on by only a handful of customers.
Only ten customers exclusively used Barclays’ branch in West Hampstead, north London, which closed last month. Eight people were reliant on the Bristol Clifton branch and nine exclusively used its Eton site.
Only 11 people who used Santander’s Oxford Headington branch for all their banking had visited more than five times over the course of six months, and 19 had done so in Margate. Its busiest branches earmarked for closure were Bethnal Green in east London, relied on by 153 customers, and Market Place in Hyde, Greater Manchester, used by 164 customers.
TSB, which is shutting 164 branches, does not publish similar figures but said that 93 per cent of customers using its Aberdeen branch, closing in May, used another branch or channel for their banking, while 87 per cent of HSBC’s Edinburgh branch customers, who will lose their branch this month, are active online and app users. Nearly a quarter of HSBC customers at its North Walk branch in Yate, Gloucestershire, due to close in June, exclusively use branches for their banking.
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A report by the FCA found that large high street banks spent a total of about £4.4 billion on their branch networks in 2017. The analysis also showed that 39 per cent of bank revenues on current accounts came from funding benefits — the mark-up banks make between what they pay in interest and what they charge on mortgages. Some 20 per cent came from arranged overdraft fees and 17 per cent on monthly current account fees; 9 per cent was on charges made from their cash machine network.
A spokesperson from UK Finance, the banking trade body, said: “Growing numbers of customers are opting to use new technologies to manage their money at a time and place that’s convenient to them, particularly during the pandemic.
“But technology is not for everyone, and bank branches continue to play an important role in the life of local communities, meaning decisions to close them are never taken lightly.”
